City office sales boom as weak pound pulls in foreign buyers

INVESTMENT in commercial property in the City of London is nearing record highs this year, as overseas investors continue to dominate the market.

Turnover for 2017 in the Square Mile is anticipated to hit £12.5bn – twice the 10-year average of £6.26bn and in line with the previous high of £12.6bn in 2014, according to research from Savills. This year there have been two record-breaking deals, with both the Cheesegrater and Walkie Talkie skyscrapers changing hands. Both buildings were sold to Chinese investors who have been among those taking advantage of the lower value of sterling which has made UK commercial property a more attractive prospect.

Meanwhile, £7.16bn will be spent in the West End market this year, bringing total turnover in central London for 2017 to £19.6bn.

Mat Oakley, head of European commercial research at Savills, said: “You are hard-pressed to find a negative market metric on the London office market at the moment, and that has been the biggest surprise of the postreferendum period.

“Many big businesses have decided Britain leaving the EU is going to take a long time and no one is rushing to make a significant decision about a relocation and get it wrong so we think the impact of Brexit is going to be markedly less and markedly later than perhaps people first thought.” He added that foreign investors had been attracted to London by the lower risk compared with their own markets, as well as yields on offices being higher than in much of Europe and Asia.

Savills found that Hong Kong buyers have taken the lion’s share of activity in London, buying just less than a third of the property that has changed hands.

UK buyers have accounted for 19.52pc of all central London transactions, while German investors make up 13.34pc and the US 10.18pc.